Every person who has a source of income through employment or business may have this question if he or she is eligible to file income tax returns or not. Before we discuss who is eligible to file income tax returns and who is excluded, let us see what filing income tax returns mean and why it is so important.
Filing of income tax returns (ITR) means making a statement of your income across various sources, tax liabilities, the paid taxes, and refunds (if any)that the government allows. Filing the income tax returns act as proof that your income is disclosed and legal. This will eventually help you get refunds, get loan applications and tenders approved, and funds for startups and more.
Who are all required to file income tax returns?
- People falling below 60 years of age having an income of more than Rs. 2,50,000 in a financial year must file ITR.
- Senior citizens above 60 years of age, and below 80 years of age, having total annual gross income exceeds Rs 3,00,000.
- Super senior citizen above 80 years of age having total annual gross income exceeds Rs 5,00,000.
- A company or a firm must file ITR for the financial year for both profit and loss.
- Individuals planning to claim a tax refund for the financial year.
- An Indian resident acting as a signing authority for any foreign account must file ITR.
- An Indian resident and owns an asset or financial interest outside India.
- Anyone who has sold equity shares in a company or unit of equity-oriented mutual funds or business trust unit trust for Rs.2,50,000 or more and earns tax-exempt long-term capital gains from the same.
- Income derived from the sale of a property that has been held under a charitable trust, religious trust, educational institution, political party, any authority, body, or trust.
- A foreign-based company that gains any treaty benefit on transactions made in India.
- An NRI (Non-Resident Indian) with total annual gross income earned or accrued in India exceeds Rs2,50,000.
- Even if a person does not fall into any of the above criteria but plans to avail any loan, he/she should file ITR as it is taken as valid income proofs and are asked when you apply for any loan.
What are the benefits of filing income tax returns?
- Ease in claiming refund – Many individuals receive income where the tax is deducted at the source as TDS, and in that case, it is mandatory to file an income tax return.
- Process documents – The approval of any loan largely depends on the applicant’s income. Hence, almost all lenders ask for income tax return file proof documents to know whether the applicant is eligible to apply for a loan or not.
- Carry-forward losses – As per income tax laws, carry forward of losses to set off against capital gains is allowed only if the person has filed income tax returns.
- Act as an income proof in compensating cases – To arrive at the compensation of a loss, the person needs to establish his income proof in which the income tax return comes handy.
Makes you a law-abiding citizen – Other than these benefits, keeping the income tax department informed about your income and taxes makes you a law-abiding citizen.